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ISO 20022: a better payments experience for customers

People want payments to be simple. They want accessible payments with strong authentication, executed instantly, at low and predictable costs, reaching intended recipients regardless of platform or jurisdiction. However, walled digital gardens, disparate standards and poor interoperability of data prevents us from providing the seamless payment experience our customers deserve.

The time to deliver is now

The ISO 20022 financial standard was designed in 2004 as a common and rich dictionary for the exchange of financial data, across systems, counterparties and jurisdictions. Whether used in XML format for traditional messaging between interbank participants, JSON format in APIs with digital first clients, fintech or big market participants, the standard is agnostic of syntax or technology of the day.

ISO 20022 is a recipe for creating new messages, and today represents a catalogue covering 23 business areas. Whether your clients want to execute payments, trade in securities, finance their supply chain, hedge foreign exchange, or simply manage their accounts, the chances are there is an ISO 20022 standard mutually agreed by the global financial community. The updated edition of SWIFT's ISO 20022 for Dummies offers an excellent primer on the topic.

A new payments language

In payments, ISO 20022 provides a dictionary for payment initiation (pain), payment clearing and settlement (pacs), and cash management (camt). This enables the capture of rich payment data, reduction of false positives, expensive investigations and interventions -- and ultimately -- a guarantee of quality compliance.

The standard allows us to carry rich invoice and remittance information, to logically structure and label important compliance data, and uniquely identify intermediary agents across the payments chain. In today's increasingly digital world, this enhanced model is essential. Whether we are supporting traditional messaging-based payments services today, new API-led open banking practices tomorrow, or the new paradigms we will inevitably see in the future, better, richer data is the key to unlocking the potential of payments -- and thus improving customer experience.

In the coming years, key high value and real-time payment systems, and correspondent banking by SWIFT, will converge around ISO 20022. A reinvigorated global value transfer platform will emerge and banking customers will benefit through improved service. Cross-border payments are often plagued by highly variable, limited, unstructured and ambiguous data -- which leads to complex processing and manual interventions. With ISO 20022, banks will be able to bring additional speed, lower costs and improved compliance to their correspondent networks.

How standardisation improves the customer experience

Today's banking ecosystem is more inclusive than ever before. With fintechs, big techs and open banking regulations, new participants are now an integral part of the payments chain -- initiating, executing and confirming payments. It is therefore more important than ever that a common language exists to exchange payments data.

While ISO 20022 is commonly used by market infrastructures in an XML structure for traditional messaging, it can also be the basis for data structures transmitted over APIs, gRPC, and other future data exchange protocols. The standardisation also facilitates the adoption of new services by customers. Customers can consume data and utilities provided by the bank in a uniform way -- one that's easier and more cost-effective to implement, regardless of how technology evolves in the future.

Faster, simpler identification

Banks today implement different mechanisms in their own correspondent banking network to identify parties to a payment. These fragmented mechanisms can cause confusion and delays in processing payments by counterparties in the payment chain. ISO 20022 offers a universal way of uniquely identifying intermediaries and agents, allowing for faster routing and processing. This speeds up payments for banking clients and reduces often complex processing. It also provides much needed transparency on actors in the payment chain.

The benefits of ISO 20022 in the banking ecosystem will become evident when participants begin to fully utilise it. Rich data must be captured at source, with sufficient detail and structure. Going forward, corporates and debtor agents will need to acquire and initiate payments with this richness. More corporates are starting to recognise the value of using the data-rich ISO 20022 standard and, increasingly, will be looking for their banks to adopt the standard more widely as well.


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